TCS Daily

Stick to the Knitting

By Alan Oxley - January 25, 2006 12:00 AM

In the 1982 business classic, "In Search of Excellence", Tom Peters deduced that "Stick to the knitting" (stay with the business you know) was a key management concept for success in business. Unfortunately, it never became a management standard in the multilateral NGO sector. "Paddle in other peoples' ponds" has been their mantra. And we have seen the cost.

UN officials are not commodity traders, but they decided to trade oil and the Oil for Food fiasco was the result. The core business of WTO officials is to manage trade rules. Yet Trade Ministers have now decided the WTO should get into the business of economic management. This is cause for real concern.

The Hong Kong meeting of WTO Ministers in December produced a weak result. Ministers declared it a success because it did not break up and they agreed on a communiqué. That was setting a very low for bar for success, but it was more than they achieved at their previous WTO meeting in Cancun in Mexico in 2004.

The Hong Kong communiqué does not materially advance the prospects of a successful conclusion of the Doha Round at the end of 2006. The hard work for that is still to be done and the chances of agreeing on important cuts in protection at the end of the year are slim.

Trade ministers went to Hong Kong aware this was the only result they would get. They had to dress up the outcome, and they used a fairly standard dressing-up approach: create a different success. At Hong Kong it was "Aid for Trade". Few trade barriers would be removed, but as compensation for any removal of barriers, aid would be provided.

Just before the meeting began, Japan announced it would increase aid by $10 billion to assist developing countries to trade. Rob Portman, the US Special Trade Representative pledged to increase US "trade aid" from 1.7 to 2.7 billion dollars annually by 2010.

There was a lot of color in these announcements. Japan's offer looked like a repackaging of its commitment at the Gleneagles G8 Summit the previous July to add US $10 billion to its aid budget.

So "Aid for Trade" matters loaded up the communiqué at Hong Kong. What's wrong with that?

Aid for Trade is not the WTO's core business. The WTO mandate is to build and manage a robust system of global rules to achieve free trade. The WTO multilateral trading system is the most successful of the multilateral systems established after World War Two. Trade has never been freer and prosperity has never been greater as a result. It succeeded because the parties to the General Agreement on Tariffs and Trade (GATT), the core agreement managed by the WTO, stuck to the knitting.

Last year the cotton dependent economies of Benin, Burkina Faso, Chad and Mali, four of Africa's poorest countries, won a ruling under WTO disputes procedures that US subsidies on cotton exports were not legal. Ministers decided at Hong Kong that export subsidies would be removed. This was the WTO doing its job.

The challenge for African cotton producers is to re-gear their cotton industries to compete in global markets which will change as a result. This is a hard core development question. If it were easy, many countries would not be as poor. Such entails fiscal management, tax collection and budget expenditure. In poor countries these are the matters that determine how economies are run. Helping them to do that is the job of the World Bank and the African Development Bank.

Trade Ministers seem to have forgotten this at Hong Kong. They authorized Pascal Lamy, the Director General of the WTO, to coordinate efforts of development bodies to restructure these African cotton economies and even to explore with development agencies a "mechanism to deal with income declines in the cotton sector" before the subsidies were removed.

Why would the head of a trade rules body know anything about that? WTO officials have rightly complained for years about other agencies sticking their nose into the WTO's business. Now Trade Ministers have stuck the WTO's nose into the business of others.

Even if it happened that Pascal Lamy were good at this, he has more important things on his plate, like marshalling the WTO's members to reduce global trade barriers. The chances of a decent result from the Doha Round are poor enough. If he is to give his best shot at success in the Doha Round by the end of the year, why would he -- or the Trade Ministers that direct him -- think he has time to work on economic management in four West African economies?

More worrying is the possibility that Trade Ministers themselves may not appreciate the core business of the WTO.

Alan Oxley is a former Chairman of the GATT Contracting Parties.

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